The “K–S statistic” is a popular (in fact, almost a standard) measure of model strength for credit risk scoring models. This article defines the “K–S statistic” and explains how it is used in the context of testing statistical hypotheses. It also points out a common interpretation error made when using this statistic. This article was written with the credit marketer, who uses risk models in conjunction with his direct mail campaigns, in mind. But since any measure of risk model strength may also be used to measure the strength of a response model, it is hoped that this article is found useful by the rest of the direct marketing world who employ modeling to its advantage.
